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Leadership Style and Organizational Structure Alignment: Impact Leadership Style and Organizational Structure Alignment: Impact

on Innovativeness and Business Performance on Innovativeness and Business Performance

Charles Ifedi

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In presenting this dissertation as a partial fulfillment of the requirements for an advanced degree from Georgia State University, I agree that the Library of the University shall make it available for inspection and circulation in accordance with its regulations governing materials of this type. I agree that permission to quote from, copy from, or publish this dissertation may be granted by the author or, in his absence, the professor under whose direction it was written or, in his absence, by the dean of the Robinson College of Business. Such quoting, copying, or publishing must be solely for scholarly purposes and must not involve potential financial gain. It is understood that any copying from or publication of this dissertation that involves potential gain will not be allowed without written permission of the author.

Charles Ifedi

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All dissertations deposited in the Georgia State University Library must be used only in accordance with the stipulations prescribed by the author in the preceding statement. The author of this dissertation is: Charles Ifedi 5180 Breezewood Cir Alpharetta, GA 30004 The director of this dissertation is: Naveen Donthu J. Mack Robinson College of Business Georgia State University Atlanta, GA 30302-4015

LEADERSHIP STYLE AND ORGANIZATIONAL STRUCTURE ALIGNMENT: IMPACT ON INNOVATIVENESS AND BUSINESS PERFORMANCE

BY

CHARLES IFEDI

A Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree

Of

Doctor of Philosophy

In the Robinson College of Business

Of

Georgia State University

GEORGIA STATE UNIVERSITY ROBINSON COLLEGE OF BUSINESS

2020

Copyright by Charles Ifedi

2020

ACCEPTANCE

This dissertation was prepared under the direction of the CHARLES IFEDI Dissertation

Committee. It has been approved and accepted by all members of that committee, and it has been

accepted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in

Business Administration in the J. Mack Robinson College of Business of Georgia State

University.

Richard Phillips, Dean

DISSERTATION COMMITTEE

Dr. Naveen Donthu (Chair)

Dr. Todd J. Maurer

Dr. Wesley J. Johnston

iv

ACKNOWLEDGEMENTS

Special thanks to my advisor and committee members for their dissertation guidance. I

also thank the supportive faculty, staff, and cohort members of the Executive Doctorate in

Business Administration Program.

I am extremely grateful to my wife, Toyin Ifedi, and my beautiful daughters, Osinachi

and Dikachi, for their understanding and support throughout the program and in particular when

I was undertaking this research.

v

TABLE OF CONTENTS

LIST OF TABLES ...................................................................................................................... vii LIST OF FIGURES ..................................................................................................................... ix

I. INTRODUCTION ................................................................................................................. 1

II. BACKGROUND AND LITERATURE REVIEW ............................................................. 4

II.1. Definitions ...................................................................................................................... 4

II.1.1. Organizational Innovativeness and Business Performance ................................ 4

II.1.2. Leadership Style ..................................................................................................... 4

II.1.3. Organizational Structure ....................................................................................... 5

II.2. Academic Literature Review ....................................................................................... 7

III. THEORETICAL FRAMING ............................................................................................. 11

III.1. Congruence Theory and Structural Contingency Theory: Key Concepts and Claims 11

III.2. Hypotheses and Model ............................................................................................ 12

III.2.1. Relating Leadership Style to Innovativeness and Business Performance ..... 12

III.2.2. Relating Organizational Structure to Innovativeness and Business Performance ....................................................................................................................... 13

III.2.3. Relating Organizational Innovativeness and Business Performance to the Leadership Style-Organizational Structure Fit ................................................................. 14

III.2.4. The Relationship between Innovativeness and Business Performance ......... 17

IV. RESEARCH METHOD ...................................................................................................... 19

IV.1. Participants and Procedures .................................................................................. 19

IV.2. Measures .................................................................................................................. 22

IV.2.1. Independent Variables ..................................................................................... 22

IV.2.2. Dependent Variables ........................................................................................ 24

IV.2.3. Control Variables ............................................................................................. 26

V. RESULTS ............................................................................................................................. 28

V.1. Defining the Empirical Model .................................................................................... 52

VI. DISCUSSION ....................................................................................................................... 56

VI.1. Key Findings ............................................................................................................ 56

VI.2. Research Contribution and Limitations ............................................................... 59

VI.2.1. Contribution to Theory .................................................................................... 59

VI.2.2. Contribution to Practice................................................................................... 60

vi

VI.2.3. Study Limitations & Recommendations for Future Research ....................... 61

VII. APPENDIX........................................................................................................................... 63

VII.1. Summarized Survey Instrument ........................................................................... 63

vii

LIST OF TABLES

Table 1. Number of employees in the organizations studied .................................................. 21

Table 2. CEO Tenure .................................................................................................................. 22

Table 3. Cronbach’s Alpha (α) Coefficients of Reliability for the Leadership Style

Measures ............................................................................................................................... 24

Table 4. Cronbach’s Alpha (α) Coefficients of Reliability for Innovativeness Measure ...... 25

Table 5. Descriptive Statistics and Correlations Among Study Variables (ALL) ................ 29

Table 6. Descriptive Statistics and Correlations Among Study Variables for the Companies

with Functional Organizational Structure ........................................................................ 30


with Divisional Organizational Structure ......................................................................... 30


with Matrix Organizational Structure .............................................................................. 31

Table 9. Regression Results for CEO Leadership Style and Organizational Innovativeness

............................................................................................................................................... 32

Table 10. Regression Results for Leadership Style and Business Performance ................... 33

Table 11. Mean and Standard Deviation of Innovativeness for the Different Organizational

Structure Types (ALL) ........................................................................................................ 34

Table 12. Mean and Standard Deviation of Business Performance for the Different

Organizational Structure Types (ALL) ............................................................................. 36

Table 13. P-value Results of Comparative Performance Score for Different Organization

Sizes ....................................................................................................................................... 38

Table 14. Regression Results for Leadership Style and Innovativeness for Functional

Organizations ....................................................................................................................... 42

Table 15. Regression Results for Leadership Style and Innovativeness for Divisional

Organizations ....................................................................................................................... 43

Table 16. Regression Results for Leadership Style and Innovativeness for Matrix

Organizations ....................................................................................................................... 44

Table 17. Regression Results for Leadership Style and Business Performance for

Functional Organizations.................................................................................................... 45

viii

Table 18. Regression Results for Leadership Style and Business Performance for Divisional

Organizations ....................................................................................................................... 47

Table 19. Regression Results for Leadership Style and Business Performance for Matrix

Organizations ....................................................................................................................... 49

Table 20. Hypotheses and Results Summary ........................................................................... 51

Table 21. Path-Analytic Regression Results of the Entire Model .......................................... 53

ix

LIST OF FIGURES

Figure 1. Characteristics of leaders with low versus high microinvolvement preference .... 10

Figure 2. Leadership Style-Organizational Structure Alignment .......................................... 16

Figure 3. Proposed Conception Model for Leadership Style-Organizational Structure Fit 17

Figure 4. Proposed conceptual model depicting the independent, dependent, and control

variables. ............................................................................................................................... 27

Figure 5. Empirical model showing the relationship between organizational structure,

organizational innovativeness and business performance ............................................... 54

Figure 6. Mediation path of CEO transformational and comparative performance through

organizational innovativeness ............................................................................................. 55

Figure 7. Mediation path of CEO transformational and employee commitment through


Figure 8. Mediation path of CEO transformational and employee job satisfaction through


x

ABSTRACT

Leadership Style and Organizational Structure Alignment: Impact on Innovativeness and

Business Performance

by

Charles Ifedi

April 2020

Committee Chair: Naveen Donthu

Major Academic Unit: Doctorate in Business Administration

Organizations strive to achieve competitive advantage and deliver superior performance

by adequately utilizing and coordinating the resources available to them. Employees are a key

resource in an organization, but it is the chief executive officer (CEO) in particular, who leads

and coordinates all the resources of the organization, that has the most impact on the

organization’s fortunes. Even though the CEO may utilize many leadership styles and behaviors,

each CEO has an innate or preferred leadership style. Organizations are structured differently,

which has an impact on the way their activities are coordinated.

In this paper, I argue that if an organization is structured in a way that does not align with

the CEO’s leadership style, then it will not be a high-performing organization. Conversely, if an

organization is structured in a way that aligns with the CEO’s leadership style, then it will be a

high-performing organization. The leadership styles evaluated are transactional and

transformational leadership, and the organizational structures reviewed are functional, divisional,

and matrix structures.

I shed light on this issue by undertaking a quantitative study of 448 employees of small-

to medium-sized companies (with 1-3,000 employees) in the technology industry operating in

xi

the United States of America. My findings show that irrespective of the organizational structure

used by a technology company, the CEO’s transformational leadership style has a direct and

indirect impact on organizational innovativeness and business performance. Contrary to some of

my hypotheses, I did not find that the CEO’s transactional leadership style has an impact on

organizational innovativeness or on business performance for any of the organizational structure

types. Additionally, I found no relationship between organizational structure and innovativeness,

or between organizational structure and business performance.

My academic contribution is demonstrated by applying CEO leadership style as a

contingency factor in the structural contingency theory, and my contribution to practice stems

from identifying which CEO leadership style is important in the achievement of organizational

innovativeness, superior performance, employee commitment, and job satisfaction.

INDEX WORDS: Organizational Structure, CEO Leadership Style, Innovativeness, Business

Performance, Job Satisfaction, Employee Commitment, Technology Company, Structural Contingency Theory, Congruence Theory, Fit, Misfit

1

I. INTRODUCTION

Many factors influence the business performance of an organization. In business fora and

literature, the factors that are most commonly considered are the size of the organization and its

market power (Ahuja, Lampert, & Tandon, 2008; Bate, Khan, & Pye, 2000; Dhillon & Gupta,

2015; Rowe, 2001; Schumpeter, 1942), the competence of the chief executive officer (CEO) and

top management team (Lieberson & O’Connor, 1972), the organization’s strategy (Yıldız,

Baştürk, & Boz, 2014), organizational culture (Hartnell et al., 2016; Wilkins & Ouchi, 1983),

employees’ satisfaction (Blanco-Oliver, Veronesi, & Kirkpatrick, 2018; Wood & Ogbonnaya,

2018), market orientation and organizational learning (Narver & Slater, 1990, 1995), and other

environmental factors (Drazin & Van de Ven, 1985; Gavrea, Ilies, & Stegerean, 2011). A lot of

research has been done on the relationship between leadership style and innovativeness (Raj &

Srivastava, 2016; Wu, Chiang, & Jiang, 2002), between leadership style and business

performance (Bass, Avolio, Jung, & Berson, 2003; Ejere & Abasilim, 2013; Tran, 2017), and

between innovativeness and business performance (Colbert, Barrick, & Bradley, 2014; Yıldız et

al., 2014). Some research has been done on the relationship between organizational structure and

innovativeness (Dedahanov, Rhee, & Yoon, 2017; Tushman & Nadler, 1986) and the

relationship between organizational structure and business performance (Andersen & Jonsson,

2006; Burton, Lauridsen, & Obel, 2002); however, very little is known about how the interaction

of organizational structure and leadership style impacts innovativeness and business

performance.

Organizations differ in their organizational structure, and CEOs differ in their leadership

styles. According to Koohborfardhaghighi and Altmann (2017, p. 46), “organizational structure

can be defined as a network of roles with a special arrangement; they relate to one another based

2

on an organizational hierarchy and act in line with organizational goals.” DuBrin (2016, p. 124)

described “leadership style as the relatively consistent and predictable pattern of behavior that

characterizes a leader.” I opine that an optimal organizational structure is required to achieve

organizational goals, and the leadership style of the CEO, who typically has the most power and

authority within the organization, has a significant impact on the achievement of the

organizational goals. Literature appears to be silent on if there needs to be an alignment between

organizational structure and CEO leadership style. In this research, I studied the impact of the fit

between the CEO’s leadership style and the organizational structure in achieving organizational

goals. I focused on technology companies in the United States to set the boundaries of the study

on an industry in which this topic has not been studied. The primary aim of this research was to

answer the question, “What is the optimal fit between the CEO’s leadership style and the

organizational structure, in order for companies to be more innovative and achieve better

business performance?”

To answer this question, I engaged with employees of technology companies via an

extensive online questionnaire to answer questions about their CEO, the CEO’s leadership style,

their organization, and its organizational structure, as well as the employees’ perspectives about

the innovativeness and performance of their organization. I then analyzed the responses from the

employees through quantitative methods. The results show that the CEO transformational

leadership style fits with all the organizational structure types. Based on the findings, I was

unable to conclude on the impact of the fit between the CEO transactional leadership style and

any of the organizational structure types on organizational innovativeness and business

performance. Considered alone, organizational structure was not seen as a significant predictor

of organizational innovativeness and business performance.

3

For academia, this engaged scholarship research contributes to the body of knowledge by

empirically applying CEO leadership style as a contingency factor in structural contingency

theory, which has not been considered in prior research. For practitioners, the study provides

practical insights to CEOs of tech companies about the importance of the transformational

leadership style if the CEO’s objective is to improve organizational innovativeness and business

performance. The findings also deemphasize the need for CEOs that utilize transformational

leadership styles to have perfect organizational structures, because any chosen structure can

work.

I now present the structure of this paper. In Chapter I, I provide the introduction to the

study, the area of concern, the motivation for the study, an overview of the entire study, and the

research question. Chapter II contains the background of the study, the definition of the

constructs used throughout the study, and a review of the extant literature on the topic. In

Chapter III, I discuss the theories applied and their claims, articulate my hypotheses, and define

the model that was tested. In Chapter IV, I explain the research method, the source and reliability

of the data, and the data collection and analysis approach. Chapter V presents the results of the

analysis, and in Chapter VI, I bring the study to a close by answering the research question,

explaining key findings and implications, presenting the research contribution and limitations,

and then proposing future research.

4

II. BACKGROUND AND LITERATURE REVIEW

II.1. Definitions

II.1.1. Organizational Innovativeness and Business Performance

Raj and Srivastava (2016) defined organizational innovativeness as the ability of the

organization to develop new products/services/processes. Innovativeness reflects an

organization’s willingness and capacity to pursue new opportunities to adopt and implement

innovations successfully (Hurley & Hult, 1998). In the changing business environment,

innovation is required to attain competitive advantage (Rubera & Kirca, 2012).

Business performance can be measured in financial and nonfinancial measures. Financial

measures of business performance are more common, and they include measures of profitability,

gross profit, return on assets (ROA), return on investment (ROI), return on equity (ROE),

revenue growth, and stock price. Nonfinancial measures focus mostly on internal achievements

of the organization, such as market share, customer growth rate, employee job satisfaction,

employee commitment, staff attrition rate, customer satisfaction, and net promoter score, among

others.

II.1.2. Leadership Style

Some literature categorizes leaders as either managerial or visionary leaders (Rowe,

2001), some as having a high level or low level of microinvolvement (Burton & Obel, 1998),

some as detail-oriented or big-picture leaders, and some as task-oriented or relationship-oriented

leaders (Fiedler, 1967), and other literature describes them as transactional or transformational

leaders (DuBrin, 2016; Raj & Srivastava, 2016). Based on the definitions used in these studies,

one could argue that these distinctions are not too dissimilar. The transactional leadership style is

5

a lot like the managerial leadership style, task-oriented leadership style, high level of

microinvolvement, and detail-oriented leadership, whereas the transformational leadership style

is like the visionary leadership style, relationship-oriented leadership style, low level of

microinvolvement, and big-picture leadership. I chose to use transactional and transformational

leadership categorizations to evaluate easily distinguishable leadership styles. In the transactional

leadership style, “the leader focuses on supervision, organization, and performance of routine

activities” (DuBrin, 2016, p. 89), establishes objectives, and monitors and controls results (Bass

& Avolio, 2004). For this study, I used the multifactor leadership questionnaire (MLQ) – form

5X-short, developed by Bass and Avolio (1995), which breaks transactional leadership style into

Contingent Reward (rewards achievement) and Management by Exception: Active (monitors

mistakes), and breaks transformational leadership style into Idealized Influence: Attributes

(builds trust), Idealized Influence: Behaviors (acts with integrity), Inspirational Motivation

(inspires others), Intellectual Stimulation (encourages innovative thinking), and Individual

Consideration (coaches people). Transformational leaders challenge the status quo (intellectual

stimulation), articulate a compelling vision of the future (inspirational motivation), engage in

behaviors that build followers’ trust in and identification with their leaders (charisma or idealized

influence), and listen to followers’ needs and concerns (individualized consideration) (Bass,

1985).

II.1.3. Organizational Structure

Various researchers have looked at organizational structure in different ways. Donaldson

(2001) used dimensions such as specialization, standardization, formalization, hierarchical

levels, and span of control to describe how organizational structures can be differentiated. Ansoff

6

and Brandengurg (1971) categorized organizational structures as centralized functional form,

decentralized divisional form, adaptive (project) form, and innovative form. Mintzberg (1980)

identified ideal types of organizational structures as simple form, machine form, professional

bureaucracy, divisional form, and adhocracy. I chose the distinctions used by

Koohborfardhaghighi and Altmann (2017), who described organizational structures as

functional, divisional, matrix, and project organizational structure, because these terms are more

commonly used in the business world today.

For this study, functional organizations are defined as organizations in which employees

are grouped by function (e.g., sales, marketing, engineering, and operations), and the

responsibility to deliver aspects of the organization’s products and services cuts across the

multiple functions working together to deliver organizational goals. A divisional organization is

structured around its products (or a cluster of products) or by geography, whereby each division

has all the functions (e.g., sales, marketing, engineering, and operations) required to run

independently. Matrix organizations are a combination of functional and divisional structure,

wherein most employees have more than one supervisor—a functional manager and an

additional manager—for example, a divisional manager, product manager, project manager, or

industry manager (depending on the focus of the organization). The main objective of the matrix

structure is to combine the benefit of day-to-day functional activities and other focus areas of the

organization. In project organizational structures, to deliver on various tasks, groups are formed

comprising employees with the requisite complimentary competences, and the groups disband

after the tasks have been concluded. In this research, I focused primarily on organizations with

functional, divisional, and matrix structures. I excluded companies with a project organizational

structure because the types of companies that I researched (i.e., technology companies) seldom

7

use this structure. It should be noted that it is possible for an organization not to have one of

these “pure” forms of organizational structure but to have aspects of multiple organizational

forms.

II.2. Academic Literature Review

Leadership style is a well-researched topic. Prior researchers agree that the leadership

style affects the level of innovativeness (Raj & Srivastava, 2016; Wu et al., 2002) and business

performance (Colbert et al., 2014; Yıldız et al., 2014) of organizations. Most leaders possess

both transactional and transformational leadership style and exhibit both behaviors to varying

degrees (Bass, 1999). In more specific terms, some research shows that a positive relationship

exists between transactional leadership style and organizational effectiveness factors such as

innovativeness, business performance, employee organizational commitment, and employee job

satisfaction (Afshari & Gibson, 2016; Jabeen, Behery, & Elanain, 2015; Rahman, Islam, Ahad

Abdullah, & Sumardi, 2018), whereas others conclude that transactional leadership behaviors

have a negative impact on organizational success factors (Masi & Cooke, 2000; You-De, You-

Yu, Kuan-Yang, & Hui-Chun, 2013). On the other hand, researchers generally agree that

transformational leadership style always has a positive effect on innovativeness, business

performance, worker execution, employee organizational commitment, and employee job

satisfaction (Garg, & Ramjee, 2013; Jia, Song, Li, Cui, & Chen, 2007; Rahman et al., 2018). A

combination of aspects of transactional and transformational behaviors to fit certain situations

has been described as delivering the most effective results in organizations (Bass, 1999; Chen &

Chen, 2009; Mosley & Patrick, 2011). Researchers sometimes suggest that the transformational

leadership style is more beneficial than transactional leadership style with respect to its impact

8

on organizational or employee effectiveness (Chen & Chen, 2009; Clinebell, Skudiene,

Trijonyte, & Reardon, 2013; Emery & Barker, 2007; Rathnaraj & Vimala, 2018).

An organizational structure, whether formalized or not, is required for an organization to

exist and be effective (Mintzberg, 1980). It is a generally held belief that the right organizational

structure enables competitiveness, innovativeness, learning, effectiveness, or performance

(Baligh, Burton, & Obel, 1996; Dedahanov et al., 2017; Khandwalla, 1973; Twomey, 2002), but

some researchers have found that there is no direct or indirect relationship between

organizational structure and organizational effectiveness, profitability, or performance (Andersen

& Jonsson, 2006). My interest in this research was to identify which organizational structure has

a positive impact on organizational success factors and which of the organizational forms

(functional, divisional, or matrix structure) is better. The literature presents conflicting views on

this topic. Ansoff and Brandenburg (1971) posited that each organizational structure type has

advantages and shortcomings, as well as conditions in which it is effective and less effective.

Some researchers have argued that divisional structures are better than functional structures

(Hamilton & Shergill, 1992), particularly as the size of the organization increases and/or the

number of products delivered by the company increases (Chandler, 1962) or the company

expands into more geographies (Egelhoff, 1982). Some researchers suggested that

divisionalization and increased diversification, particularly into unrelated businesses, lead to

higher cost and lower performance (Bettis, 1981; Luffman & Reed, 1982; Rumelt, 1984) and that

the more diversified a company is (i.e., the more products a company offers), the harder it is to

manage (Hitt & Ireland, 1987). My opinion is that this is likely the case during the initial phases

of the divisionalization, but as the new business area stabilizes and begins to contribute, the

divisionalization and diversification may lead to higher returns. Dedalhanov et al. (2017) argued

9

that centralization and formalization (which are attributes of a functional organization) have a

negative relationship with organizational innovativeness. Looking at the industry at large, it is

evident that there are several innovative and high-performing functional-structured

organizations, and there are several innovative and high-performing divisional organizations.

Apple, Google, and Microsoft (after 2013) use functional structures, whereas General Electric,

Microsoft (before 2013), and Sony use divisional structures (Dhillon & Gupta, 2015; Rowe,

2001). One may therefore conclude that organizational structure alone is unable to determine the

innovativeness and business performance of a company.

In the preceding paragraphs, I discussed some of the current knowledge of how

leadership style and organizational structure uniquely impact innovativeness and business

performance. When it comes to the factors that influence organizational structure’s impact on

innovativeness and business performance, the most researched are size, strategy, and

environment. Studies that evaluated the interaction of leadership style and organization’s impact

innovativeness and business performance are quite scarce. Burton and Obel (1998) posited that

leaders have a preference for either high or low levels of microinvolvement with differing

attributes (see Figure 1). They argued that high microinvolvement leadership preference, which

is similar to transactional leadership style, is a misfit for matrix organizational structure,

divisional organizational structure, and low centralization. They also argued that low

microinvolvement leadership preference, which is quite like transformational leadership style, is

a misfit for functional organizational structure, and high centralization.

10

Adapted from Burton and Obel (1998, p. 98)

Figure 1. Characteristics of leaders with low versus high microinvolvement preference

It is a commonly held belief that organizational innovativeness has a direct and positive

impact on business performance, and this has been confirmed in several empirical studies

(Chien-Huang, Ching-Huai, & Kao, 2008; Colbert et al., 2014; Yıldız et al., 2014). For an entire

organization to be innovative, someone or something must create a culture that fosters

innovativeness across most parts of the organization. In this study, I argue that the interaction of

CEO leadership style and organizational structure impacts organizational innovativeness. Then, I

suggest that higher organizational innovativeness leads to higher business performance.

In the next chapter, I provide an overview of the theories that I applied in the study and

present the hypotheses and model developed for the study.

11

III. THEORETICAL FRAMING

III.1. Congruence Theory and Structural Contingency Theory: Key Concepts and Claims

Morton and Hu (2008) state that “Structural contingency theory posits that business

performance is achieved by matching organizational characteristics to contingencies.” According

to Donaldson (2001, p. 7), contingency is defined as “any ‘variable’ or ‘factor’ that moderates

the effect of an organizational characteristic on business performance.” Donaldson (2001) argued

“that size, environment, and technology are the underlying contingencies in the structural

contingency literature.” Donaldson (2001, as cited in Morton & Hu, 2008, p. 393) stated that

“three main elements form the core paradigm of structural contingency theory: (1) there is an

association between the contingency and the organizational structure; (2) contingency impacts

the organizational structure; and (3) there is a fit of some level of the structural variable to each

level of the contingency, where high fit leads to effectiveness and low fit leads to

ineffectiveness.”

Nadler and Tushman (1980) described congruence as the measure of how well pairs of

components fit together. They defined the congruence between two components as “the degree to

which the needs, demands, goals, objectives, and/or structures of one component are consistent

with the needs, demands, goals, objectives, and/or structures of another component” (Nadler &

Tushman 1980, p. 45).

The core concept of these theories is “fit” (Drazin & Van de Ven, 1985). Congruence

theory focuses on various aspects of an organization being aligned for effectiveness, while

structural contingency theory focuses on one of the contingent factors being organizational

structure. Both theories agree with the proposition that an organization whose characteristics

(e.g., needs, demands, goals, objectives, and structures) fit with the contingencies, factors, or

12

variables in its situation will perform more effectively than an organization whose characteristics

do not fit with the contingencies in its situation (Nadler & Tushman, 1980), thereby leading to

better business performance. In this paper, I focus on leadership style as a contingency variable

because it has not been adequately researched. Fiedler’s (1967) contingency model holds that the

best style of leadership is determined by the situation in which the leader is working. Similarly, I

reason that once CEOs understand their leadership style, they should adapt it to fit the

organizational structure, or adapt their organizational structure to align with their leadership

style.

Throughout this paper, I use congruence, fit, match, and alignment interchangeably. I

also use organization and company interchangeably.

III.2. Hypotheses and Model

III.2.1. Relating Leadership Style to Innovativeness and Business Performance

As discussed in section II.2, prior researchers agree that leadership style impacts

organizational innovativeness and business performance. They, however, disagree on the

direction, positive or negative, of its impact. Because I focus on transactional and

transformational leadership style, I evaluate their impact as well as the direction of their impact

on innovativeness and business performance, and therefore propose the following hypotheses:

Hypothesis 1: CEO transformational leadership style and CEO transactional

leadership style are significant predictors of organizational innovativeness.

Hypothesis 2: CEO transformational leadership style and CEO transactional

leadership style are significant predictors of companies’ business performance.

13

III.2.2. Relating Organizational Structure to Innovativeness and Business Performance

Prior researchers also presented differing views on whether there is a direct (or indirect)

relationship between organizational structure and organizational effectiveness. Organizational

structure is at the center of structural contingency theory, so it is pertinent to verify if there is an

association between organizational structure and organizational innovativeness, and between

organizational structure and business performance for technology companies in the US. I also

wanted to identify which organizational form is better.

As organizations grow larger, they tend to move from functional to divisional or matrix

structures to remain focused and nimble. Based on this, I can assume that it is a commonly held

belief that if functional organizations do not move to divisional structures, they will become less

innovative. Due to the multiple reporting lines in matrix organizational forms, it is assumed that

matrix organizational structures are more complex than functional and divisional structures; as

such, they are not as efficient. To test these assumptions, I assessed the following:

Hypothesis 3a: Companies with divisional structures are more innovative than

companies with functional structures.

Hypothesis 3b: Companies with divisional structures are more innovative than

companies with matrix structures.

Hypothesis 3c: Companies with matrix structures are more innovative than

companies with functional structures.

Hypothesis 3d: Organizational structure is a significant predictor of company

innovativeness.

14

Because I argue that innovativeness leads to business performance, I therefore expected

that organizational structure would have the same impact on innovativeness and business

performance. As such, I also tested the following hypotheses:

Hypothesis 4a: Companies with divisional structures achieve better business

performance than companies with functional structures.

Hypothesis 4b: Companies with divisional structures achieve better business

performance than companies with matrix structures.

Hypothesis 4c: Companies with matrix structures achieve better business

performance than companies with functional structures.

Hypothesis 4d: Organizational structure is a significant predictor of business

performance.

III.2.3. Relating Organizational Innovativeness and Business Performance to the Leadership

Style-Organizational Structure Fit

For any organizational structure to be effective, the ability to coordinate all activities and

collaborate across the boundaries of function or structure is required for effectiveness. The CEO

of an organization has the overall responsibility of coordinating and driving collaboration,

particularly for medium-sized organizations. My primary claim in this paper is that the

appropriate (or inappropriate) alignment between a CEO’s leadership style and organizational

structure increases (or decreases) organizational innovativeness and business performance.

In functional organizations, each of the functional teams performs different specialized

tasks and activities. For a CEO to adequately manage such an organization, the CEO needs to be

able to coordinate the different activities of the functional teams and pay attention to detail.

15

Transactional CEOs innately pay attention to detail, whereas transformational CEOs are typically

“big picture” minded, so I deduced that there would be a fit between transactional CEOs and

functional organizations, and a misfit between transformational CEOs and functional

organizations. Divisional organizations, on the other hand, have divisions that are

semiautonomous that can run effectively on their own without much interference. Overseeing a

divisional organization would require a CEO who can paint a vision and motivate the divisions,

which are traits exhibited by transformational CEOs and less so by transactional CEOs. The

transactional CEO is very competent in coordinating and directing, which are not very necessary

in a divisional organization and as such could lead to micromanaging and possible disruption of

the independent activities of divisions. I therefore deduced that there would be a fit between a

transformational CEO and a divisional organization, but a lesser fit (or even misfit) between a

transactional CEO and a divisional organization. An organization with a matrix structure requires

a lot of coordination, like a functional organization, as well as the ability to present a clear

strategy for the organization and motivate employees. The transactional CEO would be able to

better handle the coordination but poor at motivating the team, whereas the transformational

CEO would be able to paint a clear vision but poor at coordinating. Because a matrix

organizational structure is primarily a functional structure organization with an additional

reporting line, I argue that the matrix organization is a better fit for a transactional CEO than for

a transformational CEO. Figure 2 summarizes the expected alignments between the CEO

leadership styles and organizational structure forms.

16

Functional Divisional Matrix

Transactional Transformational Note. = congruent = matched = aligned = fit = incongruent = mismatched = not aligned = misfit = likely congruent / likely mismatched = likely incongruent / likely mismatched

Figure 2. Leadership Style-Organizational Structure Alignment

I evaluated the following hypotheses with respect to company innovativeness:

Hypothesis 5a: For companies with functional structures, the CEO transactional

leadership style is a greater predictor of company innovativeness than the CEO

transformational leadership style.

Hypothesis 5b: For companies with divisional structures, the CEO transformational


transactional leadership style.

Hypothesis 5c: For companies with matrix structures, the CEO transactional


transformational leadership style.

Similarly, for business performance, I evaluated the following hypotheses:

Hypothesis 6a: For companies with functional structures, the CEO transactional

leadership style is a greater predictor of the company’s business performance than the

CEO transformational leadership style.

17

Hypothesis 6b: For companies with divisional structures, the CEO transformational


CEO transactional leadership style.

Hypothesis 6c: For companies with matrix structures, the CEO transactional


CEO transformational leadership style.

III.2.4. The Relationship between Innovativeness and Business Performance

To validate previous studies that showed a relationship between innovativeness and

business performance, such as that of Rubera and Kirca (2012), I hypothesized the following:

Hypothesis 7: There is a positive relationship between organizational innovativeness

and business performance.

Figure 3. Proposed Conception Model for Leadership Style-Organizational Structure Fit

I defined a model (see Figure 3) in which leadership style is the contingency of focus.

The conceptual model theorizes that specific CEO leadership style and organizational structure

factors, individually and together, lead to organizational innovativeness and business

18

performance. For business performance, I used three dimensions: one external dimension

(comparative performance) and two internal dimensions (employee job satisfaction and

employee commitment).

In Chapter IV, I provide details on how the data were collected, information about the

quantitative survey and the respondents, and the variables used in the study.

19

IV. RESEARCH METHOD

IV.1. Participants and Procedures

I obtained the data utilized for the research by surveying respondents who work in

technology companies in the United States. As a member of the Technology Association of

Georgia (TAG), I obtained the list of the 37,383 TAG members in the US, which comprised the

member name, company name, and e-mail address of each member. The TAG website

(https://www.tagonline.org/about/) states that TAG has “over 35,000 members representing over

2,000 tech and tech-enabled companies.” Because I was interested in organizations with fewer

than 3,000 employees, that had been in operation for at least 2 years, and that were based in the

US, I utilized the LinkedIn.com profiles, company website information, and other resources on

the Internet to prune the list down to 5,346 TAG members who worked in organizations that met

these criteria, and I sent the survey to only these potential respondents. I sent the survey

introduction and follow-up e-mails to each of the members via Qualtrics to ensure that responses

were adequately tracked. I sent a total of four e-mails to each potential respondent over an 8-

week period between July 31, 2019, and September 27, 2019. Upon receipt of the survey e-mail,

respondents were expected to read the research overview, review the survey instructions, and

then complete the online questionnaire. Each respondent was required to start and finish the

survey in one or multiple sittings within a 7-day period from when the respondent clicked on the

survey link to start the survey. Of the 5,346 respondents e-mailed, 1,126 e-mails bounced back,

24 respondents declined to participate, 142 respondents had partial or inaccurate data (which

made their responses ineligible), and 448 respondents fully completed the survey (11.05%

response rate). Inaccurate data included recipients who worked in ineligible organizations where

their organizational structure had changed less than 2 years prior to the time of completing the

20

survey. No incentives were given for the survey completion; however, respondents were

promised that they would receive a summary of the research findings at the completion of the

study.

Of the respondents, 275 (61.4%) identified as male, 172 (38.4%) as female, and one

(0.2%) as “Other.” In terms of the respondents’ highest level of education, one (0.2%) had not

completed high school, 26 (5.8%) had completed high school, 45 (10%) had not completed

college, 151 (33.7%) had a college degree, 32 (7.1%) had completed some graduate school, and

193 (43.1%) had completed graduate school. Eighteen respondents (4.0%) were between the

ages of 18 and 24 years, 107 respondents (23.9%) were between the ages of 25 and 34 years, 178

respondents (39.7%) were between the ages of 35 and 44 years, 105 respondents (23.4%) were

between the ages of 45 and 54 years, 28 respondents (6.3%) were between the ages of 55 and 64

years, and the remaining 12 respondents (2.7%) were 65 years old and older. Thirteen

respondents (2.9%) had worked with their organizations for less than a year, 98 respondents

(21.9%) had worked with their organizations for 1–3 years, 159 respondents (35.5%) had worked

for 4–6 years, 57 respondents (12.7%) had worked for 7–9 years, 62 respondents (13.8%) had

worked for 10–12 years, 12 respondents (2.7%) had worked for 13–14 years, and 47 respondents

(10.5%) had worked with their organizations for 15 years or more.

Only organizations headquartered in the US and that had been in operation for 2 or more

years were considered in the study. The organizations studied were headquartered in 41 out of

the 50 US states (see Figure A1 for the US regions represented). Thirty-nine of the organizations

(8.7%) studied had been in operation for 2–5 years, 123 (27.5%) had been in operation for 6–10

years, 49 (10.9%) had been in operation for 11–14 years, and 237 (52.9%) had been in operation

for 15 years or more. Table 1 presents the number of employees in the organizations studied, and

21

it shows that 36.8% of the companies (165) had fewer than 500 employees, 33.7% of the

companies (151) had between 501 and 1,000 employees, and 29.5% (132) had more than 1,000

employees.

Table 1. Number of employees in the organizations studied

No. of employees

No. of organizations

% of organizations

1-50 18 4.0% 51-100 46 10.3%

101-200 39 8.7% 201-300 15 3.3% 301-400 16 3.6% 401-500 31 6.9% 501-600 43 9.6% 601-700 10 2.2% 701-800 22 4.9% 801-900 17 3.8%

901-1,000 59 13.2% 1,001-3,000 132 29.5%

448 100.0%

The survey also obtained information about the CEOs of the companies. Of the CEOs,

378 identified as male (84.4%), 66 as female (14.7%), one as “Other”, and three elected not to

respond to this question. Six of the CEOs (1.3%) had worked with their organizations for less

than a year, 42 (9.4%) had worked with their organizations for 1–3 years, 159 (35.5%) had

worked for 4–6 years, 58 (12.9%) had worked for 7–9 years, 81 (18.1%) had worked for 10–12

years, 22 (4.9%) had worked for 13–14 years, and 80 (17.9%) had worked with their

organizations for 15 years or more. I distinguished between how long the CEOs had worked with

the organizations and how long the CEOs had been CEOs at the organizations, which is

presented in Table 2.

22

Table 2. CEO Tenure

No. of years No. of years

as CEO % of CEOs Less than 1 year 7 1.6%

1 year 2 0.4% 2 years 7 1.6% 3 years 47 10.5% 4 years 46 10.3% 5 years 92 20.5% 6 years 39 8.7% 7 years 30 6.7% 8 years 18 4.0% 9 years 14 3.1%

10 years 66 14.7% 11 years 7 1.6% 12 years 8 1.8% 13 years 6 1.3% 14 years 4 0.9%

15 years or more 55 12.3% 448 100.0%

For representativeness of the leadership style, I compared the CEO leadership style score

with the U.S. public, and they were not very divergent (see Table A1 for details).

IV.2. Measures

For each of the constructs, validated scales created in previous research were employed

where available. Cronbach’s alpha coefficients were used to determine the reliability of the

constructs. Statistical significance was set at a 95% confidence interval level (p < .05).

IV.2.1. Independent Variables

For organizational structure, a question was used to ascertain which organizational

structure (i.e. functional, divisional, or matrix) the organization used. The question asked was

23

“Please characterize the form of your organizational structure based on the definitions provided

below.” The definitions provided were “Functional – employees are grouped on the basis of their

area of specialization (e.g., sales, marketing, or R&D)”; “Divisional – employees are grouped on

the basis of product, service, geography, etc., and each division has the resources (sales, product

managers, etc.) required for it to operate semiautonomously. Support functions (HR, finance,

etc.) may be shared”; and “Matrix – combination of functional and divisional, where most

employees have two managers (e.g., a functional manager and a divisional manager).” The

options provided to the respondents were “Functional,” “Divisional,” “Matrix,” and “Other,” and

respondents who chose “Other” had the ability to provide additional information about their

organizational structure. Of the data collected, 245 companies (54.7%) were functional, 90

companies (20.1%) were divisional, 110 companies (24.6%) were matrix, and three companies

(0.7%) were described as “Other.”

The leadership style measure sought to assess the CEOs’ transactional and

transformational leadership qualities, which was assessed using 28 out of the 45 items of Bass

and Avolio’s (1995) Multifactor Leadership Questionnaire (MLQ Form 5x-Short). The MLQ

uses four items each (totaling eight items) to measure contingent reward and management by

exception (active) relating to transaction leadership. In addition, MLQ uses four items each

(totaling 20 items) to measure idealized attributes, idealized behaviors, inspirational motivation,

intellectual stimulation, and individualized consideration relating to transformational leadership.

I averaged the item scores for each scale to form the respective scores each scale. I also averaged

all the items related to transactional leadership style and transformational leadership style to

form their respective scores. Cronbach’s alpha coefficients of reliability for transactional

24

leadership styles and transformational leadership style, as well as each of their subconstructs, are

presented in Table 3.

Table 3. Cronbach’s Alpha (α) Coefficients of Reliability for the Leadership Style Measures

Construct Scales Description Cronbach’s

alpha Cronbach’s

alpha

CEO Transactional Leadership Style

Contingent reward

Rewards achievement

0.851

0.811 Management-by-exception: active

Actively manages by exception

0.758

CEO Transformational Leadership Style

Idealized attributes

Builds trust 0.756

0.946

Idealized behaviors

Acts with integrity

0.750

Inspirational motivation

Inspires others 0.809

Intellectual stimulation

Encourages innovative thinking

0.816

Individualized consideration

Coaches people 0.839

IV.2.2. Dependent Variables

To ascertain organizational innovativeness, I adopted Shoham, Vigoda-Gadot, Ruvio, and

Schwabsky’s (2012) scale to evaluate various dimensions (i.e., creativity, openness to change,

future orientation, risk-taking, and proactiveness of the organizations). I averaged the item scores

for each scale to form the respective scores for each scale, and I averaged all the items to form

the organizational innovativeness score. Cronbach’s alpha coefficients of reliability for

organizational innovativeness, as well as each of their subconstructs, are presented in Table 4.

25

Table 4. Cronbach’s Alpha (α) Coefficients of Reliability for Innovativeness Measure

Construct Scales No. of Items Cronbach’s alpha

Cronbach’s alpha

Organizational Innovativeness

Creativity 5 0.902

0.961

Openness to change

4 0.900

Future orientation

4 0.916

Risk-taking 4 0.836

Proactiveness 4 0.865

For business performance, I chose to assess one external dimension (comparative

financial performance) and two internal dimensions (employee job satisfaction and employee

commitment) independently. For comparative financial performance, I asked the respondents

“How would you rate your company’s overall financial performance compared to competition?”

and provided the options: far below average, somewhat below average, average, somewhat

above average, and far above average. I chose to use this measure for financial performance

because I was targeting responses from nonpublic organizations, which would be unwilling to

provide confidential financial information to a third party. To augment the nonavailability of

detailed financial performance, I added two nonfinancial business performance scales (employee

commitment and employee job satisfaction) adapted from Shoham et al. (2012). For employee

commitment, there were four items, and I averaged the item scores to form the employee

commitment score. The Cronbach’s alpha coefficient of reliability for employee commitment

was 0.884. For employee job satisfaction, there were five items, and I averaged the item scores to

26

form the employee job satisfaction score. The Cronbach’s alpha coefficient of reliability for

employee job satisfaction was 0.844.

IV.2.3. Control Variables

To ascertain the influence of leadership style and organizational structure on

innovativeness and business performance, it was important to control for certain variables that

could otherwise explain the dependent variables. The control variables considered were size of

the organization, age of the organization, CEO leadership experience, and number of years the

CEO had been in the company. I controlled for organization size because it is likely going to

have a high correlation with comparative performance, and it is a frequently researched predictor

of business performance. I controlled for the age of the organization because I also expected it to

correlate highly with the age of the organization and comparative performance. I controlled for

CEO leadership experience and the CEO tenure in the organization to avoid the clouding the

effects of CEO leadership style on the results.

To determine the size of the organization, the question “How many employees are

employed in your company?” was asked, and the options 1–50, 51–100, 101–200 . . . 901–1,000,

and 1,000+ were provided. For the age of the organization, the question “How long has the CEO

been employed in this organization?” was asked, and the options provided ranged from “less

than 1 year” to “15 years or more.” The CEO tenure was determined by asking, “How long has

the CEO held the CEO position in your company?” and providing the options “less than 1 year”

to “15 years or more.” In addition, the CEO experience with the company was determined by

asking “How long has the CEO been employed in this organization?” and the options ranged

from “less than 1 year” to “15 years or more.”

27

Using each of the variables that would be evaluated, I revised the model in Figure 3 and

produced Figure 4.

Figure 4. Proposed conceptual model depicting the independent, dependent, and control variables.

The analysis strategy, approach, and the results are presented in Chapter V.

28

V. RESULTS

The statistical analysis was performed using IBM SPSS Statistics Version 25 (2017).

Descriptive statistics (e.g., mean and standard deviation) and Pearson’s correlations were used to

analyze the data and evaluate the relationships between the variables. Multiple regression is used

to determine how well the independent variables are able to predict the dependent variables. The

independent t-test was used to determine whether a statistically significant difference in

organizational innovativeness and business performance exists between the organizational

structure forms. The Baron and Kenny (1986) method (described in Miles & Shevlin, 2001, pp.

187–190) is used to analyze the mediation path of the model (i.e., innovativeness–performance).

Tables 5–8 show descriptive statistics and correlations among the independent,

dependent, and control variables for all the respondents, and then for respondents in

organizations with functional, divisional, and matrix structures. Looking at the correlations,

which include all the organizations studied, transactional leadership style correlated positively

with transformational leadership style (r = 0.757, p < .01), organizational innovativeness (r =

0.589, p < .01), comparative performance (r = 0.313, p < .01), employee job satisfaction (r =

0.505, p < .01), and employee commitment (r = 0.466, p < .01). Transactional leadership style

also correlated positively with the same variables across all the organization structure types.

Similarly for all the organizations studied, transformational leadership style correlated positively

with organizational innovativeness (r = 0.739, p < .01), comparative performance (r = 0.433, p <

.01), employee job satisfaction (r = 0.630, p < .01), and employee commitment (r = 0.617, p <

.01). Similarly, transformational leadership style also correlated positively with the same

variables across all the organization structure types. Comparing innovativeness with the business

29

performance dimensions for all the organizations, organizational innovativeness correlated

positively with comparative performance (r = 0.429, p < .01), employee job satisfaction (r =

0.793, p < .01), and employee commitment (r = 0.752, p < .01). Organizational leadership style

also correlated positively with these same variables across all the organization structure types.

Not surprisingly, organizational innovativeness had a negative correlation with company age (r =

-0.117, p < .05) for all the organizations and for organizations with functional structures.

Organizational innovativeness was not related to organizational size, CEO company experience,

and CEO tenure in all the organizations, as well as in each specific organizational structure type.

As expected, comparative performance correlated positively with organization size (r = 0.193, p

< .05) in all the organizations, as well as for the functional and divisional organizations.

Employee job satisfaction had a negative correlation with CEO tenure (r = -0.193, p < .05) with

only the data of all the organizations but did not correlate for each of the specific organization

forms. Employee job satisfaction did not have a relationship with any of the other control

variables.

Table 5. Descriptive Statistics and Correlations Among Study Variables (ALL)

Variable Mean SD 1 2 3 4 5 6 7 8 9 1. Transactional 2.558 0.795 2. Transformational 2.846 0.798 0.757** 3. Organizational

Innovativeness 3.995 0.806 0.589** 0.739**

4. Comparative Performance

3.920 0.955 0.313** 0.433** 0.429**

5. Employee Job Satisfaction

4.004 0.897 0.505** 0.630** 0.793** 0.383**

6. Employee Commitment

4.118 0.918 0.466** 0.617** 0.752** 0.359** 0.787**

7. Organization Size

7.890 3.898 0.135** 0.043 0.074 0.193* 0.059 0.046

8. Company Age 13.060 3.714 -0.091 -0.096* -0.117* 0.003 -0.068 -0.044 0.343** 9. CEO company

experience 8.270 4.288 -0.068 -0.096* -0.043 0.030 -0.061 -0.040 0.066 0.443**

10. CEO Tenure 8.380 3.960 -0.145** -0.162** -0.077 0.007 -0.102* -0.069 0.002 0.353** 0.827**

Note. *p < .05. **p < .01. n = 448.

30

Table 6. Descriptive Statistics and Correlations Among Study Variables for the Companies with Functional Organizational Structure

Variable Mean SD 1 2 3 4 5 6 7 8 9

1. Transactional 2.561 0.799 2. Transformational 2.848 0.780 0.748** 3. Organizational

Innovativeness 4.005 0.775 0.611** 0.740**


3.910 0.939 0.265** 0.370** 0.384**


3.994 0.871 0.505** 0.612** 0.754** 0.335**


4.128 0.900 0.450** 0.602** 0.717** 0.333** 0.771**


7.52 4.033 0.231** 0.128* 0.165** 0.268** 0.101 0.077

8. Company Age 12.74 3.697 -0.084 -0.096 -0.136* 0.030 -0.102 -0.039 0.314** 9. CEO company

experience 8.020 4.296 -0.078 -0.117 -0.049 0.031 -0.056 -0.009 0.011 0.427**

10. CEO Tenure 8.240 4.105 -0.120 -0.155* -0.041 -0.021 -0.081 -0.004 -0.049 0.334** 0.854**

Note. *p < .05. ** p < .01. n = 245.

Table 7. Descriptive Statistics and Correlations Among Study Variables for the Companies with Divisional Organizational Structure



Innovativeness 3.995 0.809 0.523** 0.683**


3.820 0.907 0.313** 0.457** 0.409**


4.023 0.939 0.423** 0.621** 0.815** 0.386**


4.094 0.992 0.402** 0.558** 0.740** 0.291** 0.799**


8.540 3.601 0.128 -0.006 -0.014 0.209* -0.052 -0.058

8. Company Age 13.710 3.494 -0.213* -0.137 -0.153 -0.077 -0.121 -0.141 0.233* 9. CEO company

experience 8.740 4.494 -0.139 -0.156 -0.137 -0.033 -0.180 -0.230* 0.128 0.437**

10. CEO Tenure 8.540 3.935 -0.258* -0.194 -0.225* 0.046 -0.193 -0.272** 0.110 0.397** 0.800**

Note. *p < .05. **p < .01. n = 90.

31

Table 8. Descriptive Statistics and Correlations Among Study Variables for the Companies with Matrix Organizational Structure



Innovativeness 3.981 0.873 0.597** 0.778**


4.040 1.004 0.417** 0.557** 0.533**


4.013 0.909 0.572** 0.678** 0.854** 0.492**


4.109 0.903 0.552** 0.700** 0.832** 0.489** 0.816**


8.240 3.714 -0.055 -0.092 -0.018 0.020 0.064 0.112

8. Company Age 13.350 3.775 -0.023 -0.067 -0.034 -0.025 0.047 0.068 0.422** 9. CEO company

experience 8.540 4.074 -0.002 -0.012 0.035 0.031 0.026 0.076 0.111 0.471**

10. CEO Tenure 8.650 3.651 -0.133 -0.163 -0.054 -0.011 -0.078 -0.040 0.020 0.354** 0.781**

Note. *p < .05. ** p < .01. n = 110.

The preliminary results of the correlations, which considers neither the combined effect

of the independent variables nor the effect of the control variables, showed the CEO

transformational leadership style had a stronger correlation than the CEO transactional

leadership style against organizational innovativeness, comparative performance, employee job

satisfaction, and employee commitment across all the organizational structure types.

Hierarchical multiple regression was used to assess the ability of the CEO

transformational leadership style and CEO transactional leadership style to predict organizational

innovativeness, after controlling for the control variables. The control variables explained 2.5%

of the variance in organizational innovativeness, and with the inclusion of CEO transformational

leadership style and CEO transactional leadership style, the total variation explained by the

model as a whole was 55.2%, F(6,441) = 92.658, p < .001. Of the control variables, organization

size (b = 0.014, beta = 0.069, p < .05), and company age (b = -0.021, beta = -0.097, p < .05) were

statistically significant. Transformational leadership style also made a unique statistically

significant contribution (b = 0.705, beta = 0.698, p < .001), while transactional leadership style

was not statistically significant. Therefore, H1 is partially supported (refer to Table 9).

32

Table 9. Regression Results for CEO Leadership Style and Organizational Innovativeness

Dependent Variable Predictors Organizational Innovativeness Transactional 0.054 Transformational 0.705** Organization Size 0.014* Company Age -0.021* CEO Company Experience 0.001 CEO Tenure 0.015 Control Variables Adjusted R2 0.025** Model Adjusted R2 0.552**

Note. Tabled values are unstandardized regression (b) coefficients. *p < .05. **p < .01. n = 448.

Next, hierarchical multiple regression was used to assess the ability of the CEO

transformational leadership style and CEO transactional leadership style to predict business

performance (using the comparative performance score), after controlling for the control

variables. Using the adjusted R2 (Table 10), the control variables explained 3.6% of the variance

in business performance, and with the inclusion of CEO transformational leadership style and

CEO transactional leadership style, the total variation explained by the model as a whole was

21.8%, F(6,441) = 21.782, p < .001. Of the control variables, only organization size (b = 0.50,

beta = 0.203, p < .001) was statistically significant. Transformational leadership style also made

a unique statistically significant contribution (b = 0.592, beta = 0.495, p <.001), whereas

transactional leadership style was not statistically significant. Therefore, H2(i) is partially

supported.

33

Table 10. Regression Results for Leadership Style and Business Performance

Dependent Variables

Predictors Comparative Performance

Employee Commitment

Employee Job Satisfaction

Transactional -0.098 -0.005 0.062 Transformational 0.592** 0.719** 0.654** Organization Size 0.050** 0.005 0.008 Company Age -0.016 0.000 -0.005 CEO Company Experience 0.004 -0.006 -0.001 CEO Tenure 0.020 0.012 0.003 Control Variables Adjusted R2 0.036** 0.001 0.011 Model Adjusted R2 0.218** 0.374** 0.392**

Note. *p < .05. **p < .01. n = 448.


transformational leadership style and CEO transactional leadership style to predict employee

commitment, after controlling for the control variables. Using the adjusted R2 (Table 10), the

control variables explained 0.1% of the variance in employee commitment, and with the

inclusion of CEO transformational leadership style and CEO transactional leadership style, the

total variation explained by the model as a whole was 37.4%, F(6,441) = 45.425, p < .001. None

of the control variables were statistically significant. Transformational leadership style made a

unique statistically significant contribution (b = 0.719, beta = 0.625, p < .001), whereas

transactional leadership style was not statistically significant. Therefore, H2(ii) is partially

supported.


transformational leadership style and CEO transactional leadership style to predict employee job

satisfaction, after controlling for the control variables. Using the adjusted R2 (Table 10), the

control variables explained 1.1% of the variance in employee job satisfaction, and with the

34




unique statistically significant contribution (b = 0.654, beta = 0.586, p < .001), whereas

transactional leadership style was not statistically significant. Therefore, H2(iii) is partially

supported. As a whole, H2 is partially supported.

An independent sample t-test was conducted to evaluate the hypotheses that

organizations with divisional structures, functional structures, and matrix structures differ

significantly from one another in their innovativeness. The mean innovativeness scores for the

different organization structure types are listed in Table 11.

Table 11. Mean and Standard Deviation of Innovativeness for the Different Organizational

Structure Types (ALL)

Construct Organizational Structure

N Mean SD


Functional 245 4.0047 0.7749

Divisional 90 3.9952 0.8078

Matrix 110 3.9810 0.8728 Note. n = 445.

The results of the t-tests for Hypothesis 3a-c are presented in the paragraphs below.

The organizational innovativeness score of functional organizations (M = 4.045, SD =

0.7749) was not statistically significantly different (t = 0.098, df = 333, two-tailed p = .922) from

that of divisional organizations (M = 3.995, SD = 0.8078). The magnitude of the differences in

the means (mean difference = 0.009, 95% CI [−0.18, 0.20]) was very small (eta squared =

0.00003) according to Cohen’s (1988, pp. 284–7) terms. Based on these results, H3a is not

supported.

35

The organizational innovativeness score of divisional organizations (M = 3.995, SD =


that of matrix organizations (M = 3.981, SD = 0.8723). The magnitude of the differences in the

means (mean difference = 0.014, 95% CI [−0.22, 0.25]) was very small (eta squared = 0.00007).

Based on these results, H3b is not supported.

The organizational innovativeness score of functional organizations (M = 4.045, SD =


that of matrix organizations (M = 3.981, SD = 0.8723). The magnitude of the differences in the

means (mean difference = 0.023, 95% CI [−0.16, 0.21]) was very small (eta squared = 0.00019).

Based on these results, H3c is not supported.

Tests and analysis were performed of organizational innovativeness comparison between

functional, divisional, and matrix organizational structure types for the organizations with fewer

than 1,000 employees, as well as for the organizational with more than 1,000 employees. The

results also showed no statistically significant difference in organizational innovativeness exists

amongst organizations with functional, division, and matrix organizational structures with fewer

than 1,000 employees, and similarly for organizations with more than 1,000 employees.

The organizational structure type (comprising functional, divisional, and matrix

structures) was the nominal variable, which I converted to dummy variables and used in a

regression analysis. A standard multiple regression was performed between company

innovativeness as the dependent variable and the dummy variables for functional, divisional, and

matrix organizational structure types as the independent variables. Using the R2, the total

variation explained by the model was 0%, F(2,445) = 0.024, n.s. None of the organizational

structure dummy variables were statistically significant, therefore, H3d is not supported. I

36

performed similar tests and analysis to ascertain how well organizational structure predicts

organizational innovativeness for organizations with fewer than 1,000 employees, as well as for

organizations with more than 1,000 employees; similarly, none of the organizational structure

dummy variables were statistically significant.

An independent sample t-test was conducted to evaluate the hypothesis that organizations

with divisional structures, functional structures, and matrix structures differ significantly from

one another in their business performance. The constructs used to measure business performance

are (a) comparative performance, (b) employee commitment, and (c) employee job satisfaction.

The mean comparative performance, employee commitment, and job satisfaction scores for the

different organization structure types are listed in Table 12.

Table 12. Mean and Standard Deviation of Business Performance for the Different Organizational Structure Types (ALL)

Construct Organizational Structure

N Mean SD

Comparative Performance

Functional 245 3.910 0.939

Divisional 90 3.820 0.902

Matrix 110 4.040 1.004

Employee Commitment

Functional 245 4.128 0.900


Matrix 110 4.109 0.903

Employee Job Satisfaction

Functional 245 3.994 0.871


Matrix 110 4.013 0.909 Note. n = 445.

37

The results of the t-tests for Hypothesis 4a–c are presented in the paragraphs below.

The comparative performance score of functional organizations (M = 3.910, SD = 0.939)

was not statistically significantly different (t = 0.803, df = 333, two-tailed p = .423) from that of

divisional organizations (M = 3.820, SD = 0.902). The magnitude of the differences in the means

(mean difference = 0.092, 95% CI [−0.13, 0.32]) was very small (eta squared = 0.00193)

according to Cohen’s (1988, pp. 284–7) terms. Based on these results, H4a(i) is not supported.

The comparative performance score of divisional organizations (M = 3.820, SD = 0.902) was not

statistically significantly different (t = −1.567, df = 198, two-tailed p = .119) from that of matrix

organizations (M = 4.040, SD = 1.004). The magnitude of the differences in the means (mean

difference = −0.214, 95% CI [−0.48, 0.06]) was small (eta squared = 0.01225). Based on these

results, H4b(i) is not supported. The comparative performance score of functional organizations

(M = 3.910, SD = 0.939) was not statistically significantly different (t = −1.108, df = 353, two-

tailed p = .268) from that of matrix organizations (M = 4.040, SD = 1.004). The magnitude of the

differences in the means (mean difference = −0.122, 95% CI [−0.34 to 0.10]) was very small (eta

squared = 0.00347). Based on these results, H4c(i) is not supported. I performed similar tests and

analysis to compare the comparative performance of the different organizational structure types

for the organizations with fewer than 1,000 employees, as well as for the organizational with

more than 1,000 employees. The results from Table 12 and Table 13 show that for organizations

with fewer than 1000 employees, the matrix organizational structure delivers more performance

than the divisional organizational structure; none of the other comparisons were statistically

significantly different.

38

Table 13. P-value Results of Comparative Performance Score for Different Organization Sizes

Construct Comparison Organizational Size

(employee count) Sig. (2-tailed)


Functional vs. Divisional

ALL 0.423 < 1,000 0.373 1,000+ 0.537

Divisional vs. Matrix

ALL 0.119 < 1,000 0.040* 1,000+ 0.989

Functional vs. Matrix

ALL 0.268 < 1,000 0.100 1,000+ 0.541

The employee commitment score of functional organizations (M = 4.128, SD = 0.900)

was not statistically significantly different (t = 0.290, df = 333, two-tailed p = .772) from that of


(mean difference = 0.033, 95% CI [and −0.19, 0.26]) was very small (eta squared = 0.00025)

according to Cohen’s (1988, pp. 284–7) terms. Based on these results, H4a(ii) is not supported.

The employee commitment score of divisional organizations (M = 4.094, SD = 0.992) was not

statistically significantly different (t = –0.109, df = 198, two-tailed p = 0.913) from that of matrix


difference = −0.015, 95% CI [−0.28, 0.25]) was very small (eta squared = 0.00006). Based on

these results, H4b(ii) is not supported. The employee commitment score of functional

organizations (M = 4.128, SD = 0.900) was not statistically significantly different (t = 0.179, df =

353, two-tailed p = .858) from that of matrix organizations (M = 4.109, SD = 0.903). The

magnitude of the differences in the means (mean difference = 0.018, 95% CI [−0.18, 0.22]) was

very small (eta squared = 0.00009). Based on these results, H4c(ii) is not supported. I performed

39

similar tests and analysis to compare the employee commitment of the different organizational

structure types for organizations with fewer than 1,000 employees, as well as for organizations

with more than 1,000 employees. The results from all the comparisons were not statistically


The employee job satisfaction score of functional organizations (M = 3.994, SD = 0.871)

was not statistically significantly different (t = -0.303, df = 333, two-tailed p = .762) from that of


(mean difference = -0.033, 95% CI [−0.25, 0.18]) was very small (eta squared = 0.00028)

according to Cohen’s (1988, pp. 284–7) terms. Based on these results, H4a(iii) is not supported.

The employee job satisfaction score of divisional organizations (M = 4.027, SD = 0.939) was not

statistically significantly different (t = 0.106, df = 198, two-tailed p = .915) from that of matrix


difference = 0.014, 95% CI [−0.24, 0.27]) was very small (eta squared = 0.00006). Based on

these results, H4b(iii) is not supported. The employee job satisfaction score of functional

organizations (M = 3.994, SD = 0.871) was not statistically significantly different (t = −0.190, df

= 353, two-tailed p = .849) from that of matrix organizations (M = 4.013, SD = 0.909). The

magnitude of the differences in the means (mean difference = −0.019, 95% CI [−0.22, 0.18]) was

very small (eta squared = 0.00010). Based on these results, H4c(iii) is not supported. I performed

similar tests and analysis to compare the employee job satisfaction of the different organizational

structure types for organizations with fewer than 1,000 employees, as well as for organizations

with more than 1,000 employees. The results from all the comparisons were not statistically


40

The organizational structure type (comprising functional, divisional, and matrix

structures) was a nominal variable that I converted to dummy variables and used in a regression

analysis. A standard multiple regression was performed between business performance (using the

comparative performance score) as the dependent variable and the dummy variables for

functional, divisional, and matrix organizational structure types as the independent variables.

Using the R2, the total variation explained by the model was 0.6%, F(2,445) = 1.347, n.s. None

of the organizational structure dummy variables were statistically significant; therefore, H4d(i) is

not supported. I performed similar tests and analysis to ascertain how well organizational

structure predicts business performance for organizations with fewer than 1,000 employees, as

well as for organizations with more than 1,000 employees. The results showed that for

organizations with fewer than 1000 employees, when referencing against divisional structure, the

model explained 1% (adjusted R2) of business performance, F(2,313) = 2.609, p = .075, with the

matrix organizational structure (b = 0.357, beta = 0.164, p < .05) being a predictor of business

performance, whereas functional organizational structure was not statistically significant. A

standard multiple regression was performed between employee commitment as the dependent

variable and the dummy variables for functional, divisional, and matrix organizational structure

types as the independent variables. Using the R2, the total variation explained by the model was

0%, F(2,445) = 0.056, n.s. None of the organizational structure dummy variables were

statistically significant; therefore, H4d(ii) is not supported. I performed similar tests and analysis

to ascertain how well organizational structure predicts employee commitment for organizations

with fewer than 1,000 employees, as well as for organizations with more than 1,000 employees.

Similarly, none of the organizational structure dummy variables was statistically significant. A

standard multiple regression was performed between employee job satisfaction as the dependent

41

variable and the dummy variables for functional, divisional, and matrix organizational structure

types as the independent variables. Using the R2, the total variation explained by the model was

0%, F(2,445) = 0.060, n.s. None of the organizational structure dummy variables were

statistically significant; therefore, H4d(iii) is not supported. I performed similar tests and analysis

to ascertain how well organizational structure predicts employee job satisfaction for

organizations with fewer than 1,000 employees, as well as for organizations with more than

1,000 employees. Similarly, none of the organizational structure dummy variables were

statistically significant.

For organizations with the functional organizational structure, hierarchical multiple

regression was used to assess the ability of the CEO transformational leadership style and CEO

transactional leadership style to predict organizational innovativeness, after controlling for the

control variables. The control variables explained 5.2% of the variance in organizational

innovativeness, and with the inclusion of CEO transformational leadership style and CEO

transactional leadership style, the total variation explained by the model as a whole was 56.9%,

F(6,238) = 54.716, p < .001. Of the control variables, organization size (b = 0.021, beta = 0.009,

p < .05), company age (b = −0.028, beta = −0.050, p < .01), and CEO tenure (b = 0.031, beta =

0.164, p < .05) were statistically significant. Transformational leadership style also made a

unique statistically significant contribution (b = 0.658, beta = 0.662, p < .001), while

transactional leadership style was not statistically significant. Therefore, H5a is not supported

(see Table 14).

42

Table 14. Regression Results for Leadership Style and Innovativeness for Functional Organizations

Dependent Variable Organization Structure Type Predictors


Functional

Transactional 0.093 Transformational 0.658** Organization Size 0.021* Company Age -0.028* CEO Company Experience -0.009 CEO Tenure 0.031* Control Variables Adjusted R2

0.052**

Model Adjusted R2 0.569** Note. Tabled values are unstandardized regression (b) coefficients.

*p < .05. **p < .01. n = 245.

For organizations with the divisional organizational structure, hierarchical multiple



control variables. The control variables explained 2% of the variance in organizational



F(6,83) = 12.936, p < .001. None of the control variables were statistically significant.

Transformational leadership style made a unique statistically significant contribution (b = 0.676,

beta = 0.629, p < .001), whereas transactional leadership style was not statistically significant.

Therefore, H5b is supported (see Table 15).

43

Table 15. Regression Results for Leadership Style and Innovativeness for Divisional Organizations



Divisional

Transactional 0.054 Transformational 0.676** Organization Size -0.001 Company Age -0.010 CEO Company Experience 0.023 CEO Tenure -0.036 Control Variables Adjusted R2

0.020

Model Adjusted R2 0.446** Note. Tabled values are unstandardized regression (b) coefficients. *p < .05. **p < .01. n = 90.

For organizations with the matrix organizational structure, hierarchical multiple



control variables. The control variables explained 1.5% of the variance in organizational



F(6,103) = 27.862, p < .001. None of the control variables were statistically significant.



Therefore, H5c is not supported (see Table 16).

44

Table 16. Regression Results for Leadership Style and Innovativeness for Matrix Organizations



Matrix

Transactional -0.106 Transformational 0.869** Organization Size 0.017 Company Age -0.007 CEO Company Experience -0.008 CEO Tenure 0.027 Control Variables Adjusted R2 -0.015 Model Adjusted R2 0.597**

Note. Tabled values are unstandardized regression (b) coefficients. *p < .05. ** p < .01. n = 104.



transactional leadership style to predict business performance (using the comparative

performance score), after controlling for the control variables. Using the adjusted R2 (Table 17),

the control variables explained 6.8% of the variance in business performance, and with the


total variation explained by the model as a whole was 17.9%, F(6,238) = 9.839, p < .001. Of the

control variables, only company size (b = 0.059, beta = 0.254, p < .001) was statistically

significant. Transformational leadership style also made a unique statistically significant

contribution (b = 0.506, beta = 0.420, p < .001), whereas transactional leadership style was not

statistically significant. Therefore, H6a(i) is not supported.

45

Table 17. Regression Results for Leadership Style and Business Performance for Functional Organizations

Dependent Variables Organization Structure Type Predictors


Employee Commitment

Employee Job

Satisfaction

Functional

Transactional -0.128 -0.002 0.102 Transformational 0.506** 0.713** 0.599** Organization Size 0.059** 0.002 0.007 Company Age -0.015 -0.002 -0.017 CEO Company Experience

0.033 -0.011 0.009

CEO Tenure -0.015 0.030 0.000 Control Variables Adjusted R2

0.068** -0.005 0.017

Model Adjusted R2 0.179** 0.356** 0.368** Note. Tabled values are unstandardized regression (b) coefficients. *p < .05. **p < .01. n = 245.



transactional leadership style to predict employee commitment, after controlling for the control


in employee commitment, and with the inclusion of CEO transformational leadership style and


35.6%, F(6,238) = 23.486, p < .001. None of the control variables were statistically significant.



Therefore, H6a(ii) is not supported.

46



transactional leadership style to predict employee job satisfaction, after controlling for the

control variables. Using the adjusted R2 (Table 17), the control variables explained 1.7% of the

variance in employee job satisfaction, and with the inclusion of CEO transformational leadership

style and CEO transactional leadership style, the total variation explained by the model as a

whole was 36.8%, F(6,238) = 24.685, p < .001. None of the control variables were statistically

significant. Transformational leadership style made a unique statistically significant contribution

(b = 0.599, beta = 0.536, p < .001), whereas transactional leadership style was not statistically

significant. Therefore, H6a(iii) is not supported.





the control variables explained 3.4% of the variance in business performance, and with the


total variation explained by the model as a whole was 24.1%, F(6,83) = 5.720, p < .001. Of the

control variables, only company size (b = 0.059, beta = 0.233, p < .05) was statistically

significant. Transformational leadership style also made a unique statistically significant

contribution (b = 0.601, beta = 0.498, p < .001), whereas transactional leadership style was not

statistically significant. Therefore, H6b(i) is supported.

47

Table 18. Regression Results for Leadership Style and Business Performance for Divisional Organizations



Employee Commitment

Employee Job

Satisfaction

Divisional

Transactional -0.045 0.003 -0.025 Transformational 0.601** 0.693** 0.775** Organization Size 0.059* -0.010 -0.009 Company Age -0.029 0.003 0.002 CEO Company Experience

-0.036 -0.007 -0.013

CEO Tenure 0.068 -0.036 -0.006 Control Variables Adjusted R2

0.034 0.032 -0.004

Model Adjusted R2 0.241** 0.293** 0.351** Note. Tabled values are unstandardized regression (b) coefficients. * p < .05. ** p < .01. n = 90.

For organizations with only the divisional organizational structure, hierarchical multiple






29.3%, F(6,83) = 7.148, p < .001. None of the control variables were statistically significant.


beta = 0.525, p < .001), while transactional leadership style was not statistically significant.

Therefore, H6b(ii) is supported.

48









(b = 0.775, beta = 0.620, p < .001), while transactional leadership style was not statistically

significant. Therefore, H6b(iii) is supported.





the control variables explained 3% of the variance in business performance, and with the




unique statistically significant contribution (b = 0.759, beta = 0.671, p < .001), while

transactional leadership style was not statistically significant. Therefore, H6c(i) is not supported.

49

Table 19. Regression Results for Leadership Style and Business Performance for Matrix Organizations



Employee Commitment

Employee Job

Satisfaction

Matrix

Transactional -0.123 -0.064 0.058 Transformational 0.759** 0.788** 0.670** Organization Size 0.027 0.041* 0.027 Company Age -0.012 0.005 0.011 CEO Company Experience

-0.017 0.002 -0.008

CEO Tenure 0.042 0.015 0.011 Control Variables Adjusted R2

-0.030 0.002 -0.009

Model Adjusted R2 0.291** 0.500** 0.449** Note. Tabled values are unstandardized regression (b) coefficients. * p < .05. ** p < .01. n = 110.







50%, F(6,103) = 19.197, p < .001. Of the control variables, only company size (b = 0.041, beta =

0.169, p < .05) was statistically significant. Transformational leadership style also made a unique

statistically significant contribution (b = 0.788, beta = 0.775, p < .001), while transactional

leadership style was not statistically significant. Therefore, H6c(ii) is not supported.

50









(b = 0.670, beta = 0.655, p < .001), while transactional leadership style was not statistically

significant. Therefore, H6c(iii) is not supported.

As presented in Table 5, I found a medium positive correlation between organizational

innovativeness and business performance (measured using comparative performance score; r =

0.429; p < .01); thus H7(i) is supported. I also found a high positive correlation between

organizational innovativeness and employee commitment (r = 0.752, p < .001); thus, H7(ii) is

also supported. Finally, there was a high positive correlation between organizational

innovativeness and employee job satisfaction (r = 0.793, p < .001); thus, H7(iii) is supported.

Tables 6–8 had already shown that, for the different organizational structure types (functional,

divisional, and matrix structure), organizational innovativeness had a medium to high correlation

with comparative performance, employee commitment, and employee job satisfaction.

51

Table 20. Hypotheses and Results Summary

Hypotheses Claim Claim supported? Hypothesis supported?

H1 Transactional Innovativeness No

Partially Transformational Innovativeness Yes

H2

Transactional Performance Comparative – No Commitment – No Job Satisfaction – No

Partially

Transformational Performance Comparative – Yes Commitment – Yes Job Satisfaction – Yes

H3a Innovativeness: Divisional > Functional No Not supported H3b Innovativeness: Divisional > Matrix No Not supported H3c Innovativeness: Matrix > Functional No Not supported H3d Organizational Structure Innovativeness No Not supported

H4a Comparative: Divisional > Functional No

Not supported Job Satisfaction: Divisional > Functional No Commitment: Divisional > Functional No

H4b Comparative: Divisional > Matrix No*

Not supported Commitment: Divisional > Matrix No Job Satisfaction: Divisional > Matrix No

H4c Comparative: Matrix > Functional No

Not supported Commitment: Matrix > Functional No Job Satisfaction: Matrix > Functional No

H4d Organizational Structure Performance Comparative – No Commitment – No Job Satisfaction – No

Not supported

H5a Functional: Transactional > Transformational Innovativeness – No Not supported

H5b Divisional: Transformational > Transactional Innovativeness – Yes Supported

H5c Matrix: Transactional > Transformational Innovativeness – No Not supported

H6a Functional: Transactional > Transformational

Comparative – No Commitment – No Job Satisfaction – No

Not supported

H6b Divisional: Transformational > Transactional

Comparative – Yes Commitment – Yes Job Satisfaction – Yes

Supported

H6c Matrix: Transactional > Transformational Comparative – No Commitment – No Job Satisfaction – No

Not supported

H7 Innovativeness Performance Yes Supported Note. For organizations with less than 1000 employees, the matrix structure delivered a better comparative performance than the divisional structure.

52

V.1. Defining the Empirical Model


transformational leadership style, CEO transactional leadership style, and organizational

structure (converted to the dummy variables for functional, divisional, and matrix organizational

structure types) to predict organizational innovativeness, after controlling for the control


in organizational innovativeness, and with the inclusion of CEO transformational leadership

style, CEO transactional leadership style and the dummy variable for organizational structure,

the total variation explained by the model as a whole was 54.6%, F(8,439) = 68.079, p < .001.

None of the control variables were statistically significant. Transformational leadership style

made a unique statistically significant contribution (b = 0.696, beta = 0.689, p < .001), while

transactional leadership style and the organizational structure variables were not statistically

significant.

53

Table 21. Path-Analytic Regression Results of the Entire Model

Dependent Variables

Predictors



Employee Commitment

Employee Job

Satisfaction Transactional 0.072 -0.071 -0.052 0.015 Transformational 0.696** 0.372** 0.192** 0.090 Functional 0.010 -0.080 -0.010 -0.040 Divisional -0.001 -0.206 -0.048 -0.006 Matrix comparative comparative comparative comparative Organization Size 0.000 0.022* -0.001 -0.001 Company Age -0.015 0.002 0.014 0.010 CEO Company Experience

0.001 0.001 -0.006 -0.002

CEO Tenure 0.013 0.011 0.001 -0.009 Organizational Innovativeness

- 0.288** 0.753** 0.804**

Control Variables Adjusted R2

0.011 0.005 -0.002 0.005

Model Adjusted R2 0.546** 0.222** 0.568** 0.628** Note. Tabled values are unstandardized regression (b) coefficients. * p < .05. ** p < .01. n = 448.


transformational leadership style, CEO transactional leadership style, organizational structure

(converted to the dummy variables for functional, divisional, and matrix organizational structure

types), and organizational innovativeness to predict (i) comparative business performance, (ii)

employee commitment, and (iii) employee job satisfaction, after controlling for the control

variables.

The results (as presented in Table 21), show that:

(i) For comparative business performance (adjusted R2 = 22.2%, F(9,438) = 15.139,

p < .001): company Size (b = 0.022, beta = 0.114, p < .05), transformational

54

leadership style (b = 0.372, beta = 0.311, p < .001), and innovativeness (b =

0.288, beta = 0.243, p < .001) were statistically significant, while other

independent variables and control variables were not statistically significant

(ii) For employee commitment (adjusted R2 = 56.8%, F(9,438) = 66.415, p < .001):

transformational leadership style (b = 0.192, beta = 0.167, p < .01) and

innovativeness (b = 0.753, beta = 0.661, p < .001) were statistically significant,

while other independent variables and control variables were not statistically

significant

(iii) For employee job satisfaction (adjusted R2 = 62.8%, F(9,438) = 84.903, p < .001):

Only innovativeness (b = 0.804, beta = 0.727, p < .001) was statistically

significant, while other independent variables and control variables were not

statistically significant.

Figure 5 illustrates the empirically supported model for my findings.

Figure 5. Empirical model showing the relationship between organizational structure,

organizational innovativeness and business performance

As a final step in my analysis, I analyzed the mediation path between CEO

transformational leadership style and each of the business performance dimensions, through

55

organizational innovativeness. This was done following the steps described by Baron and Kenny

(1986). The results (Figures 6–8) demonstrate that organizational innovativeness is only a partial

mediator of the relationship between CEO transformational leadership style, and each of the

business performance dimensions – comparative business performance, employee commitment,

and employee job satisfaction.

Note. The values presented in the models below are the unstandardized regression coefficients (b), and p-values in brackets Figure 6. Mediation path of CEO transformational and comparative performance through

organizational innovativeness

Note. The values presented in the models below are the unstandardized regression coefficients (b), and p-values in brackets

Figure 7. Mediation path of CEO transformational and employee commitment through organizational innovativeness

Note. The values presented in the models below are the unstandardized regression coefficients (b), and p-values in brackets Figure 8. Mediation path of CEO transformational and employee job satisfaction through

organizational innovativeness

56

VI. DISCUSSION

With a focus on the technology companies in the United States of America, this study

addressed the research question, “What is the optimal fit between the CEO’s leadership style and

the company’s organizational structure, to make companies more innovative and achieve better

business performance?” I expected to expand on contingency and congruence theory by

empirically establishing leadership style as a contingent factor on organizational structure, and

identifying the ideal fits between the respective leadership styles and organizational structure

types that enhance innovativeness and business performance.

Generally speaking, the results showed that CEO transformational leadership style is

aligned with each of the organizational structure types and thereby leads to improved company

innovativeness and business performance. On the other hand, there was no fit between CEO

transactional leadership style and any of the organizational structure types to enhance company

innovativeness and business performance. In the following sections, I detail the key findings and

discuss the implications of the study results.

VI.1. Key Findings

Key Finding #1: CEO transactional leadership style is NOT a significant predictor of

company innovativeness or business performance

My findings are consistent with other research findings that transformational leadership

style is a predictor of organizational innovativeness, and the findings also supported prior

research on the relationship between transformational leadership and the business performance

dimensions studied (i.e., comparative performance, employee commitment, and employee job

satisfaction. Different prior studies presented conflicting results on the relationship between

57

transactional leadership style and organizational success factors, with some finding a positive

relationship and some others finding a negative relationship; however, my findings were unable

to determine whether CEO transactional leadership has an impact on organizational

innovativeness and business performance. I therefore conclude that CEO transformational

leadership style is a greater predictor of organizational and employee effectiveness than CEO

transactional leadership style is.

Implications: As CEOs adopt both transactional and transformational leadership styles,

to varying degrees, CEOs who focus on the transactional leadership style may not be

able to determine the innovativeness and performance of their organizations. On the

other hand, CEOs who continue to apply their transformational leadership capabilities

have a better chance of driving the innovativeness and performance of their

organizations.

Key Finding #2: Unable to conclude that organizational structure is a significant

predictor of company innovativeness or business performance

In most scenarios, my results were unable to demonstrate organizational structure as a

predictor of organizational innovativeness, comparative performance, employee commitment,

and employee job satisfaction. However, for organizations with less than 1000 employees, the

results showed that companies with matrix organization structures achieve superior business

performance to companies with divisional organizational structures, relative to their competitors.

The inability of my results to definitively show that organizational structure has an impact on

organizational and employee effectiveness does not mean that organizational structure is not

important. Instead, I reached the conclusion that “any organizational structure works.” Provided

58

that there is a defined way that an organization is structured and coordinated, the organization

has a chance to perform. There are a number of possible explanations of why the organizational

structure type was not identified as a predictor of organizational innovativeness and business

performance. It may be because: (a) the organization design (i.e. what is documented) is very

different from what is being practiced in the organization (Ferner, 2000); (b) organizational

structures are dynamic, and they evolve (Bate et al., 2000); (c) organizations do not necessarily

adopt a ‘pure’ organizational form (like functional, divisional, and matrix, or (d) that, even where

the company has chosen a pure organizational structure form, the employees are not performing

the roles assigned to them, due to reasons within or beyond their control. Whatever the reason is,

I can conclude that there are other factors at work, beyond organization structure, that determine

the effectiveness of employees and organizations.

Implications: CEO or top-management teams of tech organizations in the United States

are unable to use organizational structure as a lever to improve organizational

innovativeness, comparative performance, employee commitment, and employee job

satisfaction.

Key Finding #3: Transformational leadership style is key to achieving improved company

innovativeness and business performance, irrespective of the organizational structure used by

the organization

The primary objective of this study is to identify an organizational structure and

leadership style fit that delivers superior customer innovativeness and business performance. The

results show that transformational leadership style fits well with each of the organization

59

structure types (i.e. functional, divisional, or matrix) in the delivery of company innovativeness,

comparative performance, employee job satisfaction, and employee commitment.

Implications: Similar to key finding #1, there is certainly some value in CEOs utilizing

transactional leadership styles; however if the CEO’s objective is to improve

innovativeness, comparative performance, employee job satisfaction and employee

commitment, the CEO should focus on developing and applying his or her

transformational leadership style capabilities.

VI.2. Research Contribution and Limitations

VI.2.1. Contribution to Theory

Little was known about the interaction between organization structure and leadership

style to impact innovativeness and business performance. This study contributed to the body of

knowledge by demonstrating that, for all the studied organizational structure types (i.e.

functional, divisional, and matrix), CEO transformational leadership style has an impact on

innovativeness and business performance when controlling for organization size (i.e. number of

employees) and organization age (i.e. number of employees).

Prior research showed differing results (positive and negative) on the impact transactional

leadership style on innovativeness and business performance. This study added to the discuss as

it was unable to determine whether CEO transactional leadership style has a significant impact

on organizational innovativeness, whether positive or negative.

Some prior studies depicted organizational structure as having a positive impact on

company effectiveness, while some others showed that there was no relationship. For the

technology companies studied in the United States, my results squared with the latter, showing

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that neither of the organizational structures predicted organizational innovativeness or business

performance; this study was also unable to identify, in general terms, any organizational

structure as better than another.

Finally, I presented a model that demonstrates that CEO transformational leadership style

is a direct predictor of organizational innovativeness, comparative performance, employee

satisfaction, and also has an indirect impact (through organizational innovativeness) on

comparative performance, employee job satisfaction, and employee satisfaction. This model, on

its own, is not new; its contribution stems from the fact that these relationships held true even

when controlling for organization size and organization age.

VI.2.2. Contribution to Practice

One of the aims of this study was to determine whether any one organizational structure

type was better than another. The results, however, did not find that any organizational structure

type was better than others. This therefore provides a contribution to executives of technology

companies, who previously believed that changing from one organizational structure to other

helps improve their organization’s innovativeness or organizational effectiveness. Although it is

good to have a good structure, there is no need for companies to spend time changing from one

organizational structure to another, because the change in itself is disruptive to the business and

does not add to its innovativeness and bottom-line

The findings of this research recommend that practitioners, particularly entrepreneurs and

business executives, focus on developing their transformational leadership capabilities, instead of

their transactional leadership capabilities, if their objective is to improve organizational

innovativeness, comparative performance, employee commitment, or employee job satisfaction.

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Several studies have shown that the transformational leadership behaviors can be learned

(Castiglione, 2006, Russell & Mizrahi, 1995).

VI.2.3. Study Limitations & Recommendations for Future Research

As with any research, this research has limitations. One such limitation is that the

measure used for comparative performance was neither objective nor a validated measure.

Knowing that the respondents work with private companies, I concluded that the respondents

would be uncomfortable providing financial performance metrics about their organizations, such

as revenue, sales volumes, EBITDA (earnings before interest, tax, depreciation, and

amortization), or return on total assets (ROTA). For the comparative performance measure, I had

initially proposed using ROTA-change over a 3-year period to be able to compare companies of

varying capital structure, debt structures, and geography; however, it was not favorably received

by the test respondents to the survey. Future research can consider targeting organizations with

publicly available financial data to achieve a more objective measure for comparative

performance.

To obtain additional context about the organizations, future researchers can include more

qualitative questions on the survey and possibly do interviews, thereby conducting mixed-

method study, which was not this study’s approach. Another way to obtain additional contextual

or qualitative information is to target specific organizations and obtain information directly from

the CEO, as well as from different people in the organization. These approaches may resolve one

of the limitations of this study, which was its incapacity to distinguish if the respondent was the

CEO or not. It would be valuable to be able to differentiate the responses by level (i.e., separate

responses given by CEOs, from responses given by those in top-management positions, and from

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responses given by other employees). This separation would enable researchers to evaluate any

biases in the responses and consider response scores by level, against the transactional and

transformational norms.

An interesting extension of this study may be to evaluate whether transformational

leadership style is better in a functional, divisional, or matrix organization. Researchers may also

undertake my same research, but on non-tech companies, in other countries, or on smaller or

larger organizations.

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VII. APPENDIX

VII.1. Summarized Survey Instrument

About the Company • Please characterize the form of your organizational structure based on the definitions provided

below (Functional: ; Divisional: ; Matrix: ; Other: ____________). • In which US State is your company headquartered? • How many years has the company been in operation since its founding date or date it commenced

operations (whichever is more recent)? • How many employees are employed in this company?

Business Performance: Dimensions: Comparative Performance, Employee Commitment, and Employee Job Satisfaction Comparative Performance Options: Far below average – 1; Somewhat below average – 2; Average – 3; Somewhat above average – 4; Far above average – 5

• How would you rate your company’s overall financial performance compared to competition? Employee Commitment - Shoham, Vigoda-Gadot, Ruvio and Schwabsky (2012) Options: Strongly Disagree – 1; Somewhat Disagree – 2; Neither Disagree nor Agree – 3; Somewhat Agree – 4; Strongly Agree – 5

• On the average, employees of the company: o Are willing to put in a great deal of effort beyond that normally expected in order to help

the organization be successful o Talk up this organization to their friends as a great place to work o Find that their values and the organization’s values are very similar o Really care about the fate of this organization

Employee Job Satisfaction – Shoham, Vigoda-Gadot, Ruvio and Schwabsky (2012) Options: Strongly Disagree – 1; Somewhat Disagree – 2; Neither Disagree nor Agree – 3; Somewhat Agree – 4; Strongly Agree – 5

• On the average, employees of the company… o Are satisfied with their jobs o Are satisfied with their supervisors o Are satisfied with their co-workers o Are satisfied with their pay o Are satisfied with their promotion opportunities

Organizational Innovativeness - Shoham, Vigoda-Gadot, Ruvio and Schwabsky (2012) Options: Strongly Disagree – 1; Somewhat Disagree – 2; Neither Disagree nor Agree – 3; Somewhat Agree – 4; Strongly Agree – 5

• Creativity: o Creativity is encouraged here o Managers here expect us to be resourceful problem solvers o We are constantly looking to develop and offer new or improved services o Our ability to function creatively is respected by the leadership

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o We are encouraged to use original approaches when dealing with problems in the workplace

• Openness o This organization is always moving toward the development of new answers o This organization is open and responsive to changes o Assistance in developing new ideas is readily available o People here are always searching for fresh, new ways of looking at problems

• Future Orientation – This organization… o Establishes a realistic set of future goals for itself o Effectively ensures that all managers and employees share the same vision of the future o Conveys a clear sense of future direction to employees o Has a realistic vision of the future for all departments and employees

• Risk-taking – This organization… o Believes that higher risks are worth taking for high payoffs o Encourages innovative strategies, knowing well that some will fail o Likes to take big risks o Does not like to ‘‘play it safe’’

• Proactiveness o We are constantly seeking new opportunities for the organization o We take the initiative in an effort to shape the environment to our advantage o We are often the first to introduce new services o We usually take the initiative by introducing new administrative techniques

Competition in the Industry Options: Fast Decline - 1, Slow Decline -2; Not Declining / Not Growing - 3; Slow Growth - 4; Fast Growth - 5

• In your opinion, what is the current direction of growth of your industry About the CEO

• How long has the CEO held the CEO position in your company? • How long has the CEO been employed in this organization?

CEO Leadership Style - MLQ Form 5x-Short (Bass & Avolio, 1995) Options: Not at all – 0; Once in a while – 1; Sometimes – 2; Fairly often – 3; Frequently, if not always - 4

• Our company’s CEO: o Talks optimistically about the future. o Spends time teaching and coaching. o Avoids making decisions

Type of tech company What type of technology company do you work in? Please select all that apply.

• We buy technology for our use • We consult in technology deployment and usage • We sell technology (hardware or software) to customers for their use • We are a technology hosting company • We provide technology support

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• We develop or manufacture technology • We provide technology-as-a-service to clients (corporates and consumers) (respondents that did not select any of the last 5 options were considered ineligible as I did not feel that they work in the type of technology company that I was interested in for my study)

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Table A1. Comparing the CEO Leadership Style Scores with US Norms

Construct Scales This Study US Norm

(total)ф US Norm (lower)Ѱ

Transactional Leadership Style

Contingent Reward

2.83 2.87 2.84

Management-by-Exception: Active

2.28 1.67 1.67

Transformational Leadership Style

Idealized Attributes

2.85 2.94 2.93

Idealized Behaviors

2.89 2.77 2.73

Inspirational Motivation

3.11 2.92 2.97

Intellectual Stimulation

2.73 2.78 2.76

Individualized Consideration

2.64 2.85 2.78

Note. The figures in the table show the mean scores of the respondents ф all the respondents in the sample, including the leader being evaluated and his/her peers, superiors, and subordinates Ѱ respondents were junior to the leader being evaluated Source: Bernard, Bass, B. & Avolio, B. (2002). Table 10a (US) - Descriptive Statistics for MLQ 5X 2004 Normative Sample. Published by Mind Garden, Inc. www.mindgarden.com

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Figure A1. Location of the headquarters of the organizations studied

0

20

40

60

80

100

120

140

160

180

Northeast Midwest South West

# of Organizations

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VITA

Charles Ifedi is a business executive, financial technology consultant, and entrepreneur, with

over 20 years of experience. His experience encompasses strategy formulation and execution,

product development and management, client and partner relationship management, business

development and sales, new market entry, investment due diligence; he also has in-depth expertise

in the development and management of fintech initiatives, including switching, processing,

integration, transfers (ACH and P2P), bill presentment, eCommerce/POS acquiring, cards (debit,

credit, prepaid, charge and multi-purpose), multi-channel platforms, and emerging solutions

utilizing QR, digital wallets, and tokenization.

Charles is currently the CEO and co-founder of eBanqo, Inc., an Atlanta-based technology

company that helps organizations enhance their customer engagement, using artificial intelligence

(AI) and conversational commerce. Prior to founding eBanqo, Charles was the pioneer CEO of

Verve International (Africa’s leading payments card brand), and a co-founder of Interswitch

Limited. He has payments and consulting experience in Africa, Europe, and the United States,

having worked at American Express, PwC, and Accenture.

Charles has a doctorate in Business Administration from Georgia State University, an MBA

from Cranfield University, and a B.Sc. Computer Science (summa cum laude) from University of

Ilorin.

Charles resides in Alpharetta, Georgia, with his lovely wife Toyin, and their amazing

daughters, Osinachi and Dikachi.

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